To Provost John Etchemendy, professor Mary Barth, and members of the GSB search committee,
My name is David Siegel. I understand that, since the resignation of dean Garth Saloner, you have the task of selecting the next dean of the GSB. You may be aware that I have been accepted as a candidate. This is my statement.
Despite his current situation, Saloner put the school on a more agile footing. While your first instinct may be to find someone with a strong reputation who will focus on ethics and integrity, I believe that may be the wrong goal. Instead, you have a chance to redesign the business school so it is impervious to the mistakes of any one person. Here is my message to you in a nutshell:
Business is on the edge of a precipice. Moore’s Law and hyperconnectedness are creatively destroying many cherished institutions and most business models. Your competition is free and online. Uncertainty is increasing, driving up volatility. Billions of people will soon get their education and make their living outside of formal organizations, using handheld devices. Software will replace many enterprise jobs. Fast is the new big. Networks are the new structure. Purpose is the new profit. Evidence is the new insight. Business schools must transform from MBA factories into learning laboratories. The GSB doesn’t need a new leader; it needs a new system.
This short essay will lay out the argument for change, propose a new framework that may help, and suggest an alternative way to design the school to meet the needs of the 21st century.
Failure is the System
As an entrepreneur, I’ve spent about seventy percent of the last thirty years of my life trying things that haven’t worked. This is roughly the same failure rate that companies see in their portfolios and in their acquisitions:
As Otis Brawley says in his book on medicine, “The System isn’t failing. Failure is the system.” Saloner’s work paves the way for a critical look at what a business school should be.
The Value of an MBA
The MBA degree is now a commodity, little more than an expensive signal with no proven value. Why does it exist at all? Here are conclusions from several studies:
- “The combined evidence suggests that while human capital accumulation may contribute to the returns to an MBA, the majority of the returns is derived from the signaling/screening function of the degree.” (Hussey, 2012)
- Studies showing the value of an MBA don’t take into account that people would have two more years of work and salary — instead they compare post-MBA pay with pre-MBA pay, a typical error.
- If the MBA is so effective, why are culture, engagement, and employee retention failing worldwide?
Screening adds no value. Each year, the screening committee accepts 7 out of every 100 applicants by asking them about their goals, their past history and successes. Does this work? Have any evil people made it through and gotten the degree? Do you track what happens to the other 93 percent, who get rejection notices? I’ve personally written (er, coached) five people’s essays and gotten them into world-class undergrad and grad schools. If the value of a Stanford MBA is in test- and essay-based screening and brand signaling, I would advise companies to stop hiring them. If the average salary of a Stanford MBA is the way we measure success, we may want a new measuring stick.
Do we Really Need Managers?
While top-down management structures have been the mainstay of business architecture for the past hundred years, we’re now in a hyperconnected world that is crushing that model. We’ve learned more about management from Google than most of the business schools put together.
In Richard Sheridan’s remarkable book, Joy, Inc., we learn about a company with no managers, where everyone is a leader, and the familiar tradeoffs and power struggles simply don’t exist. Where people treat each other like family and take care of each other first, before their customers.
In Frederic Laloux’s book, Reinventing Organizations, we learn of companies with no management, where everyone is empowered, and people sometimes lead and sometimes follow. Speed, not size, is what these organizations have going for them.
The art of management is being reinvented on the run at companies like Google, Facebook, Spotify, Zappos, Hubspot, Netflix, and a new wave of future disruptors. In leadership, we are transforming from the myth of the Great Man to a mesh network of self-management and fluid leadership.
The Complex Adaptive World
Leaders and managers often fail because we don’t live in a mechanical, repeatable, cause-and-effect world. Most businesses exist in complex adaptive systems. In complex adaptive systems, experts are more wrong than they think, plans don’t pan out, overconfidence leads to mean reversion, cause and effect are extremely difficult to establish, luck is a huge factor, the case method fails, and you never know where your next threat, ally, or savior will come from. You can make the right decision and have it come out badly, and you can make a bad decision and get good results. Cognitive biases and statistical blindness prevent business people and journalists from seeing the big picture.
Complex adaptive systems require complex adaptive solutions. What worked in the business case narrative may not have taken the complexity of the ecosystem and the role of luck into account. What worked just a few days ago may not work today. Most business theories rely on a repeatable connection between cause and effect that doesn’t exist.
In an adaptive, responsive organization, culture matters a great deal. It’s almost impossible to change corporate culture from the top down. As I outline in my essay, The Culture Deck (and as Herzberg shows), people have the intrinsic motivation to make their work meaningful and rewarding. They need to feel that it’s okay to try new things and it’s safe to fail.
The 21st Century Business School
You may not think you have a curriculum problem at Stanford, but I think you do. I have developed a curriculum that you’ll find in my business-agility course outline. Here is a high-level view:
I won’t break it down here. Instead, I’ll point to a few specific suggestions I think would add to what the GSB is already doing.
Schools need teachers the way companies need managers. They don’t. To see the future, visit Ecole 42 in Paris — a school with no teachers, no books, and no tuition. There certainly can be a role for managers and teachers, but they are the opposites of their 20th-century counterparts, and they don’t have tenure.
If the company of the future is a laboratory, why isn’t the business school of the future a laboratory? In business school, you should learn how to conduct research, develop hunches, do experiments, analyze data, understand the role of randomness and luck, make decisions in the face of uncertainty, set expectations according to your forecast, then use agile principles to implement the plans, get constant feedback from the market, and continue to improve as you get more data. Not case studies.
Failure is underrepresented. Failure is the dark matter of the business universe — it far outweighs the visible yet remains hidden and unstudied. I recommend bringing in Jerker Denrell to help bring a balance to people’s perspectives. By understanding failure, we can build better portfolios.
Who needs degrees? Since the MBA is a commodity, why not create something more practical? I suggest a core first-year curriculum based on a new agile framework we construct together. Then I would set up sprints that are one-month long. Students and business people come for as many sprints as they like. They can create or jump on a research project. They can help build infrastructure and tools for thinking and doing. No need to apply, just come at the beginning of the month and get involved. Do things in person you can’t do online.
Master’s (MBA) students will need to become evidence-based decision makers and attend seminars in applied rationality (critical thinking and statistical literacy). This is two years of hard work. We could add a third year doing entrepreneurship in a developing country with SEED — that should increase the quality and determination of the applicant pool.
Develop foxes, not hedgehogs. Working with uncertainty is far more difficult than most people realize. Most of our decisions later turn out to be wrong. A large percentage of the numbers companies use every day are simply wrong. This five-minute video explains the concept:
Continue to improve critical thinking. As Danny Kahneman says, we too often use System 1 (thinking fast) when we should be using System 2 (thinking slow). This is even true at the top schools, where rigorous nonsense and politics have replaced the scientific method more than we realize. As Jeffrey Pfeffer, Bob Sutton, and others have shown, there’s a huge gap between what we want to achieve and what we’re actually doing.
Continue to increase the pace of innovation. We should learn to try things we think won’t work, break things that aren’t broken, and listen to weak signals we’re used to ignoring. We should combine rational decision making with irrational exuberance in execution. Slow — fast — slow — fast. This is a skill. Learn it, and you can apply it to every aspect of your life.
Transition from push to pull. We are in the middle of a seismic transition from pushing products, services, and information to setting up for it to be pulled. This is the theme of my last book, Pull. It impacts education, business, government, and our personal lives tremendously. More than anything, it’s a change of mindset, of world view: from “supply chains” of information to vibrant evolving ecosystems. Everything will be a service, even education. Imagine making Stanford available to anyone, anywhere, any time, in a way that works for her.
Develop and install better systems. We can use real-money prediction and decision markets to make most of our internal decisions. We can hire generalists and build adaptive systems, rather than specialists and org charts. We can — and I’m serious about this — put all the record keeping and accounting on the blockchain, where it will be far more secure. As I wrote in my last book, we can hook up with the law school to overhaul all our contracts and turn them into software. If all goes well, the school can reduce its administrative staff by at least seventy percent within five years or so. It’s not about saving money; it’s about agility.
Business schools can lead the way in reversing discrimination. We all do it. Whether it’s by race, sex, height, weight, age, ethnicity, disability, or looks, we need systems to help reduce discrimination dramatically. It’s a business school’s job to take this seriously, and to help people in all companies realize that they will perform better with more cognitive diversity. It doesn’t help to make people aware of biases. The key to being antifragile is to build systems that embrace and enhance differences.
Every business school should educate its university on the principles of Beyond Budgeting. Read Future Ready, by Morlidge and Player, to understand why rolling forecasts and continuous budgeting should be part of the way the University operates. Go to Probabilitymanagement.org to learn how Stanford’s Sam Savage is reinventing the way we talk about risk and uncertainty.
Learn how to Learn. For example, students can learn to do randomized controlled trials and learn far more about true cause and effect than they get from textbooks and common beliefs. Example: a recent study of microcredit in developing countries using controls found that microcredit programs around the world are less effective than we thought. MBA students can learn to do research by working on real-world problems; they will pick up business skills along the way.
If students are studying for and taking exams, they aren’t preparing for the real world. There is no evidence that exams help students or employers later in life. I would hope all exams will be gone within two years of my arrival at Stanford.
Here are a few more problems I would like to work on:
* Employee engagement
* People don’t quit companies, they quit their bosses
* Legacy processes, legacy thinking
* Decisions made by seniority and gut feel
* Blockchain-based systems and cryptocurrencies
* Technological unemployment
* Silos: how to avoid them, how to dissolve them
* Human resources (many companies now operate well without HR)
* Factory-model education
* Poor communication systems, opacity, hiding information
* Discrimination and non-diversity from the board level dow
* Top-down approach to everything
* False beliefs that become hardened
* How to build everything as a service
* A business press that promotes myths and delusions
* Fear of boss, fear of failure, fear of speaking up
* Specialist mentality, slow innovation, slow adoption of new ideas
* Confusion of cause and effect
* Confusion of science and marketing
* Confusion of skill and luck
* How to set up and optimize decision and prediction markets
* The admissions process
* Using mechanical, engineering thinking in complex adaptive systems
* Poorly designed portfolios
Christine Ortiz, dean of graduate studies at MIT, has left to start her own future school with no classes, no lectures, and no grades. This is the laboratory/project approach to education we need.
There’s much more to be done with the curriculum and the design of the student experience. This is just a start. Saloner’s necessary changes give us the chance to continue innovating.
The Agile Dean
Is there such a thing as an agile business school with an agile dean? Perhaps. But perhaps the best dean is no dean. I propose we honor Garth Saloner as the last dean of the GSB. Getting rid of this hierarchical position sends a signal that things are going to be different this century. The GSB should be antifragile — the mistakes (perceived or real) of a single person shouldn’t distract us from our goal of reinventing business.
It’s time to knock down the walls of the dean’s office to make way for more collaboration space and more fun. The culture of the school should be agile and lean itself. You don’t need a board room if your culture embodies radical openness. You don’t need a touchy feely class if the culture is touchy feely. You don’t need innovation day if every day is innovation day. You can better teach agile if you are agile. A few sticky notes may help. We can transform the school into an energetic, creative, adaptive environment where people work and support each other. It’s time to make the b.school more like the d.school and include creative resources sprouting up everywhere.
Stanford business school doesn’t need a hero. Stanford is already building a resilient culture. It’s time to accelerate, not to go back. I believe the GSB needs a new mission: to boldly reinvent business across the globe, so that people are energized and happy designing, building, and working alongside the robots and software of the connected future.
John and Mary, I will make you an offer I hope you’ll consider: instead of hiring a new dean, honor Saloner as the last dean and hire me to be part of the new, open system. Titles aren’t important. Anyone who wants the title may not be the right person. I propose we work on creating value, rather than signals.
How to do it? Simple. Just start with an initial team of, say, me and four other people — co-deans — and let us work it out from there. That’s all you really have to do: switch from a single charismatic personality to a team. We’ll report back as we incrementally challenge and keep or rebuild elements of the school according to evidence-based principles over a period of several years.
This approach may seem radical and risky, but I think not to do so — to find someone who is universally unthreatening — is even more risky. There is tremendous uncertainty in the future; do you really think you can interview and vet your way to navigating it with no surprises?
Recently, Malcolm Gladwell wrote a piece about Vincent DeVita, whose career has been dedicated to breaking the rules and gaming the system in an effort to find cures for cancer. In this story, DeVita is seen as a lousy politician who won many battles against cancer but ultimately lost the war against bureaucracy. He became Memorial Sloan Kettering’s physician-in-chief, but he didn’t survive the politics. Gladwell’s article concludes:
“The problem with Vince,” the hospital’s president reportedly said, in announcing his departure, “is that he wants to cure cancer.”
The problem with people like Garth Saloner, Jeffrey Pfeffer, Bob Sutton, Gary Hamel, and other radical revolutionaries is that we want to fix business. Working together, I think we have a unique opportunity to do just that.
David Siegel (CV)
My thanks to Rob Siegel and David Wineberg for their help.
NOTE: CURRENT AND FORMER STUDENTS, FACULTY, AND STAFF: Help me lead Stanford into the 21st century. Send tweets using @Stanfordbiz in the text, tell friends, and help me organize a grass-roots campaign to tell the trustees that change is coming. Use the URL www.openstanford.com for this page. I could use help with media contacts, online forums, and anywhere Stanford people gather.
Over the next twenty years, the pull movement will radically reshape our world. I hope to take it beyond the business school to make Stanford a more open, networked global campus that celebrates self-management, purpose, statistical literacy, and trust without hierarchy, tests, and rote memorization. Stanford should be creating critical thinkers. I would like to scale the Stanford mission to educate billions of people around the world.
I’m ready to dedicate the rest of my life to this mission. Please tell me how I can best help. My email is firstname.lastname@example.org